Cullen/Frost Bankers (CFR) 26 Jan 232022 Q4 Earnings call transcript

Greetings, ladies and gentlemen, and welcome to the Cullen/Frost Bankers Inc. Fourth Quarter Earnings Conference Call. At this time, all participants are on a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions].

conference recorded. this reminder, a is being As

It Mr. and A.B. my pleasure ahead. Director your host, to introduce go Mendez, Please Investor Thank is Relations. now of you. Senior Vice President

Donna. Thanks,

will This Jerry and Executive be morning's Group conference led Phil and Salinas, CFO. Green, and President by Vice CEO Chairman call

moment over Safe the Harbor Before call and I address to I turn need to Jerry, Phil the to take a provisions.

Reform the earnings with Act today calling will XXXX constitute statements Private additional factors Relations the is Securities intend of release XXXX in the Litigation XXX-XXX-XXXX. Safe Harbor risk We be as remarks the forward-looking made copy amended. website these statements provisions about or for Some by the to of for Please Securities Private amended. Act covered the morning's of last information Litigation associated the see the If as on our as of release page forward-looking of statements Investor needed, statements. forward-looking available A at this defined such in text Reform contained department in by

this turn the call over At time, Phil. to I'll

Thanks, A.B., us. joining Thanks and everybody. afternoon, for good

Salinas, Cullen/Frost before your Today, fourth the quarter Officer, results additional we questions. provide our I'll Chief Financial for Jerry open it review for will comments and up

last $XX.X of fourth or quarter $X.XX earned in a reported XX%. That $XXX.X of the Cullen/Frost with increase quarter, of same earnings million Well, share a the million represented or compared $X.XX in an share year.

don't to very that often. You get say

same our growth, XXXX. of respectively, and along into the and common strong These and average quarter fourth us heading were X.XX% period that they strategy assets with are year. with XX.XX%, well and on very compares return organic in last results X.XX% sustainable position average for the Our X.XX% equity

over of closer an fourth expectation loans, $XX our a just annual was in XX.X%. quarter look excluding PPP the and increase high billion loan growth of of in average with quarter, XXXX, average at loans of long-term fourth solid were taking $XX.X the quarter billion single-digit compared Now above growth, the

For excluding loans, total the were full year up XXXX XX.X%. average PPP

fourth CRE booked growth third approximately consumer. from increases the in I commitments success quarter on basically loan more versus quarter flat. balances staff X/Xrd X/Xrds a that estate for earlier quarter, Our billion impact represented the current by the our were calling growth in on it's having X% C&I activity, balances the especially their projects. in new economic is in said, rate third of the impact believe prospecting from and non-annualized and We in our That is quarter evaluate fourth $X.X the Fed's this sector environment clear and the and efforts an interest borrowers demonstrated commercial as up the of year. real program the commercial

example, I quarter. It's it's year-end. to down at XX% think previous XX-day look at the For interesting pipeline our from weighted

However, down component the of XX%, the of is segment that that pipeline while is up XX%. pipeline customer prospect

our prospects overall deals reflects consistent see our the So our as base come commercial market. available estate shine we and liquidity through, in the underwriting to strong from of potential real customer current continue as softening

deposits in full Jerry year quarter Average up will more over $XX the of average XX.X% comments. for quarter were about deposit more XXXX, the than recent fourth And billion, increase the $XX.X year. compared deposits an billion, and $XX.X last with trends were in the in of billion his XXXX, X% total talk fourth

be good our quarter estate these and home is banking The consumer growth our to in consumer by great improvement. equity primarily credit HELOC, This last over products loans XX.X% for real billion We up and were consumer continue strong. from outlook see business. fourth the $X.X fourth home in to Average quarter, loans the of continues year.

for In growth consumer rates created The sharp portfolio, average perfect XXXX is fact, of increase previous quality in Credit real environment year. XXX% was estate and equity HELOC. our outstanding improvement, best the in mortgage the secured consumer such home this is XXX. our as credit and home loan in score our loans,

I'm also pleased that funding mortgage our we program. in recently began loans

the to or Once of created opening complete process basis created team it. this new and mortgage with limited out the year. has up customers roll we lending program, and Our it mobile great to and a a around the pilot ground experience to we'll later this mortgage keeping we've goal service loan on loans everyone originate a mortgage up from digital and philosophy, with Frost

continues. in households Growth new

For the year, at of X.X% we year. customers the end number the last than higher added of had about almost XX,XXX new households, we

While we slightly lower last growth, and it opened branches this XX,XXX that's of year's the from that was high all-time believe best-in-class to organic net XXXX. of we represents almost customers, down number in related

number high XXXX. Given customers opening increase in then, the expect of to we in achieve new all-time since

seen advisers across of business. In addition, has record wealth a our amount new

our our to around formas. additional they have year-end, add pro X.X. branch deposits, goal of including areas branches our we'll in opened Houston we've and new Expansion Loans region. the in Houston goals, stood branches continue exceed billion call the to locations our continue and strong of efforts, at household $XXX we and year-end, Regarding goal totaled original of deposit XX of the $X expansion XXX% what expansion loan At at we XXX% surpassed million XXX%

of household we added results encouraged of doing goal by the the same the We Houston program. be locations the the In achieved what are early better in and quarter loan up than to XX financial sites, new new pace frame, the goal, XXX% even under very which fourth rapid deposit a soon, in goal. centers had our at Dallas, are we'll time XXX% new of and XXX% of

million the million previous We charge-offs $XXX reported compared the million $X in a $X.X Annualized loans, Overall, quality define totaled loans. and credits. million fourth of the in for at which were were of at was the quarter, end end credit were for $XXX which year the Problem $X.X loss quarter. X charge-offs fourth compared of the quarter grade million of fourth risk million the of at and Non-accrual ago. quarter period-end with higher, at the of net the loans fourth a credit $XXX the as quarter we points an the million of XX fourth good. of the remains XXXX. $XX.X X end third, expense million result the $XX.X end basis quarter fourth the from small with increase quarter Net

could higher interest economic and potential from of rates, are current the there horizon high supply inflation risks continuing to regard With environment, that disruption. pockets on chain the result

Overall, investor and all above-average project indicative loan operating estate real commercial metrics across asset stable types. performance portfolio remain of

still the interest ratios coverage and asset completed operating for impact that reported office types, for rising in office, service of 'XX, retail expenses debt projects primarily multifamily, remain year-over-year of and decline a due quarter lease-up. warehouse construction fourth acceptable While rates, at to now is are multifamily observed inclusion higher the

and including low lease four, coverage of service office of Regarding portfolio for XX% office quality the ratio weighted the the office current A assets. at around loan-to-value of class predominantly average this specifically our portfolio three, optimism portfolio, number and two, of one, office duration; the nature tenant X.XXx Class asset and existing debt character metrics, sponsors; stabilized experience stems most average the an projects; and from, strong

were owner-occupied at and investor this outstanding and $X.X represented billion, buildings year-end half amount, Office projects. of half was

loan digits fourth of end portfolio quarter. remains single loans energy the of concentrations the PPP Our in excluding X.X% at at the

them, have and continues more advanced leverage have Our deleveraging rates as borrowers in rates a experienced continued lowest, generally oil risk. we've returning bullish intermediate lending price environment structures have ratios appropriate for to gas as be a shareholders. Frost the and and hedging prudent energy outlook borrowers for to and whole years, continue term. to a prices borrowers of to structures are including favorable the with advance offer The near and current our for will program minimize energy that and many

out PPP a We've forgiveness with the job great closing process. done

with new relationships sponsorship our new often lot to strengthened mortgage exciting offerings on us. loans. we've with that hard new all, the to pay remain to with new positioned we've centers. we financial opportunities of our strong organic with help that for a company our whatever awareness It's We're brand consumer want our I holds. this We're that We're most. need when kept into and areas for going our growth. all growing team many built strengthening with customers I enhancing say us for beautiful are dividends strategy communities best sustainable will of So our future so and they and expanding of say well continuing And years. work got We the proud

adhering be to force while do Day we service. providing and integrity, At day out, employees core in customer lives. our a and good all excellence of everyday this work by truly and values hard people's to in industry-leading our Frost, for carrying

Now additional the Chief Officer, to for over I'll turn some Financial comments. call Salinas, Jerry our

you, Thank Phil.

first interest Looking net at our margin.

both last positive net both fourth by up the XX These held had higher higher yields higher partially basis securities our impacted lesser the interest X.XX%, balances positive both higher investment a agreements. impact quarter volumes points increase percentage net to by was much X.XX% investment a and on Higher the of was positively Fed Our percentage. volumes and margin on loans quarter. interest for on were loans. at from cost deposits repurchase largest reported and on and costs margin by also offset and extent The yield the securities of impacts

million in averaged about made Looking taxable billion, included excess investment yield average $XXX $XXX at equivalent to securities We yield securities from of during the our investment quarter, of X.XX%. some our total portfolio as approximately MBS The municipal in up which billion the the portfolio. of deploy investment X.XX% the Agency quarter. during and $X.X million continue quarter $XXX we $XX.X of a with with during purchases third million liquidity fourth a quarter

expectation purchases basis impacted equivalent on The current points The $X is the prior approximately on up quarter which taxable a quarter, from portfolio the the For of of billion invest MBS billion XX by securities. during investment from $XX would into up of or inflows $XXX up the liquidity Agency about X.XX% the basis was higher that $X.X XX investment excess XXXX, quarter. quarter prior year fourth during in from X.XX% recently million yield total our the the billion, taxable yields an averaged our the projected purchased net we third additional yield year. points had portfolio,

PSF or up $XXX municipal quarter. of had of yield $X.X billion of points was the a the equivalent about from XX% insured. million third taxable prior tax-exempt basis end the fourth X.XX%, the Our At the quarter, approximately up portfolio fourth portfolio from pre-refunded during municipal averages X quarter about and the quarter,

the this years, of at duration fourth MBS up quarter extended X.X years duration third the from impacted the the our at The higher was Agency investment securities of portfolio in X.X of end of by quarter end environment. rate the the

Looking basis, at from up third $X.X billion down about demand deposits billion $X linked-quarter the or half from for billion, averaged deposits. Customer coming of average average deposits the with decrease fourth deposits. and $X repos $X.X quarter. coming interest-bearing in half On the X.X% were from a billion quarter the

some have We the our during flows repo seen quarter. into deposit product

combined up cost the XX was from from quarter interest-bearing in basis of averaged points the the The quarter. the Total and up repos million $XX.X for fourth $XXX customer deposits deposits X.XX%, third quarter prior quarter. billion,

million credit year. the during quarter, unfunded commitments. first credit loss of ending represents this by growth a in fourth booked loss at loss driven billion booked was Regarding expense Unfunded the a expense expense, credit of during we which commitments the loss $X quarter, The year. expense credit quarter the the $XXX million, $XX.X at grew we end

a primarily X.X% largely prices. in Looking resulting quarter commodity accounts higher increases down deposit a commercial in and lower $X.X X% on or fees, million million, estate combined fees of balances. gas $X.X earnings of down lower consumer million, increase from and $XXX,XXX at fees a and this Trust due were offsetting decrease non-interest charges $XXX,XXX of to investment charges. in was a Partially management annualized or down were commercial of result basis. fees oil as estate a service credit fees by real $X.X billion up charges, rate income decrease were partly and on on $X overdraft $XXX,XXX Service linked investment as offset $XXX,XXX

to or a up $XXX,XXX income SBIC million result was cycle. commissions as due Insurance third primarily and life the of were from $X.X normal down quarter lower fees $X.X received insurance million, $X.X XX.X% and impacted which commissions, Other an by were from million also our a investment. business down distribution

was the to up X.X% or $XX.X were are made drivers in immediately. was wages million non-interest by by to year third or expense increase The and or awards compared $X.X salaries million are X.X% those The Regarding compared third up of up primary some $XX.X and increase impacted million stock their every nature, salary the wages compensation quarter. and million expenses and non-interest stock total expenses, other total in XX.X% a in quarter. $X.X expensed as October

were advertising up losses higher in typically marketing incentives the The other was $X.X up $X to accrued fourth million non-interest in the which fraud-related and Additionally, million of impacted negotiation million, and $XX.X prior $X.X quarter. increase a $X is expense related from quarter. million, licensing by million up higher

full we total XXXX total rate the in noninterest XXXX the Looking non-interest reported increase percentage to at our a level. at our XXXX for year projection mid-teens year of expenses, expense full expect over

expansion product and Dallas the Also marketing the advertising people staff. in by introduction X.X% both on and continued support mortgage is for about be that we in proposition will growth and technology information investments and expense accounts of expanding our our projected projected Investments value impacting is in making our growth continued significant of that growth. Houston focus communication infrastructure. we for impacted with of of and Our the both people also associated costs rate in as

for rate excluding discrete or quarter tax about effective fourth The items. XX.X%, XX% was the

rate XX.X% full XX.X%, be the by year but expectation can tax for to current in about year. that is discrete Our the during that affected items of should range be XXXX our effective

XX Regarding current in in projections a point increase include earnings, the basis for July. full estimates year XXXX a decrease Fed point followed basis our rate XX by February,

of assumptions rate mean we the expense those estimates non-interest reasonable. that $XX.XX of currently and analyst believe is Given the current growth XXXX of mid-teens,

now Phil turn the call questions. that, for to over With I'll back

up we'll Jerry, for Hi open now. questions it

[Operator Instructions].

first ahead. Bank America. of of today The Ebrahim go question Poonawala is coming Please from

First wanted Phil, to real commercial follow around estate. up on remarks,

and months to themselves your we do Maybe across impacting as multifamily you out? on color the one, in out see to customers? playing if X risk you One, you how it over risk both process Would And us manifest do hikes don't come on of maybe and So the time, across sector may markets at was noted the pipeline off. But we you see just like for in back love translates not the -- this thought rates pain and some rate pressure about the office. cooling think the how has the your XX around next impact talked look how give Thank around rolls And do this your translate the your out Frost, cut. but interest play to strength that an things. you for book. rent from cash get of a credit impact Frost? may market flows you. terms that? mentioned But at same having it

coverage Okay. example, say, on we got on so word was, good don't underwater as it. some service our Well, are to multifamily, we But about pretty I that debt ratios, the expect, let's for feel I'll people from Thanks, be we credit mentioned. Ebrahim. I tightening quote, seeing those

you loan-to-value about -- I was I you on gave If offices think XX%. our look what at

of half be 'XX. our to in in you XX%. the value completed other 'XX, half it's deals If multifamily, loan About at our on look will

now. portfolio. lot up So from as I also keeping today don't of think rents to there's are people relates our that it a pressure I hear our for

helping that's increasing. things, but also are So costs

been you're what tenants got lower-class losing are to office want issues, don't being just make to But hearing. think some kind got I I to and have the that. It's be going risk around we've where problems. I'm market, tightening sure been it's this in buildings feeling I you've if everyone's things give the if honest, of you up. want that

office about, what $X If be a was problem I credits asking is what It's guess, portfolio, took we the I think you of over have might I $XX portfolio. the at portfolio, billion. our probably million on look

they're that are don't and So have issues of much kind specific. you really

I as again, they I impression good were. want to So are things impression want the negative, the as too things do not to give give don't but are

also big here, problem they've a that big a would is around and I say increase. tax seen property

anybody as still out rates So we're biggest figure operating concern, when also you has to out because combine I'd I couple business. costs going not that what's with the the market then a Again, on happen years, and to offices but of to interest think say, at it don't probably generally much. trying multifamily. offices with apartments, It's are this the over some figured pressure, point, next going in create so

So what I that than clarity don't we're that's seeing I'm sorry have but better Ebrahim. any

outlook the expect terms No. of That's the you trending, net One, us sense grow Jerry, that what in how at 'XX? point a see And NII year. for given you just quarterly interest Give of deposit in year? the helpful, declines earnings expect mentioned you about Phil. expect of NII you growth in and you do income where continues trajectory for what to some Or some terms growth? see loan you do

Yes, sure.

we quarter, the I were into I NIM talking percentage. XXXX, little a said about and think that we got bit last

peak. I July. would our But in the think first see quarter. increase and I our improvement. our we're currently, decrease probably mind, increase that that then February certainly, a don't is rate I still we obviously, given peaks a coming points, into assumptions the between the we in the quarter. basis of given expect growth fourth a was assumptions, my sort see XX quarter, we'll I think that expect third think in don't probably that quarter fourth third our nice had that, in NIM I I some expect And a do and that

interest between say, As think and have we're I what far be grew on I 'XX, But strong not this last. seeing. think year-over-year, give as to think we'll to 'XX going there growth XX%. on of percentage specific to I But kind I'm income. year going based net we we're it's don't growth compared

Thank it. you. Got

The question ahead. go you. JPMorgan. is Alexopoulos Please coming Steven of from Thank next

on I the wanted start to side. deposit

color in were of outflows out do a moving risk bit you I what stabilizing? still than mix And see the were you could know at we might you for. you but bit saw non-interest mentioned And non-interest-bearing bearing. more give a fairly what of So more that sharp looking see repos, the you quarter, little where

Yes, non-interest-bearing.

there. I non-interest-bearing think today, what about I of pretty area know where they're the exposure where really kind to With really exposure. that there. is at some that's on that's the have concerned been some rates area we said that we out had continue I've we And I rates the and most nice the there's think been all

I looking it managing of really they're make think treasurers liquidity well that to compelling is that for lot sure and alternatives. their a CFOs and

competitive I see most to especially, lot where risk think the but situations, there's cases of on is. larger think balances, think don't in that's anywhere that I to outflow, the it's we probably anybody. going we're some especially unique can to going deposit be a where I be certainly, of some of

think, from rates, standpoint, that deposit with banks. I think are I competitive a our rate

commercial the probably the alternative in at the that think my sources. to becomes the challenge I expect on DDA with trying side most But I commercial is do mind. compete some risk

it. Got

loan-to-deposit of the XXXX, book. funding similar a moved terms up what deposit should through XXXX. ratio, through in growth? we basically trend securities in the expect putting slightly loan just Jerry, But then, I'm you're work saying with I to And hear liquidity growth Okay.

on what bigger for think more deposit side. I is unknown what on the mind, my side happens the I than happens loan think in that the XXXX, probably

given Phil seeing good we're of some think in what I loans. color

side. happens think confident, think the pretty it's without might little economy, a be I in that knowing feel there. exactly But I I there deposit what think uncertainty we

loans. right, loan-to-deposit standpoint our relationship because both deposits from grow standpoint because So really to a a fact, we're said always we've you and ratio results the in is could from out really

sort that I I of couple we've XXXX. given So be in in of have project expect that years, the that had to muted don't the that increase that deposits think I we'll much last more

in denominator improvement simply ratio You decreases. may just the get because some that

Got it.

the side, in Okay. finally, that the guided mid-teens mid-teens make. year, for you reported we a take back a line growth guiding XXXX, you mid-teens more so that? longer-term as now something think do this what view, And then, then basically have with range? When more period scenario, Thanks. this XXXX, do on you'll sort you expense expense Or in to had after to XXXX, investments you for beyond we stay of and normal for X-year in a of see get you guys time,

question. good it's Steve, a

our I rate XXXX. think us. to I an investments the mentioned in simple expense marketing. Jerry go IT down growth year answer is unusual And run XXXX to the is mentioned on for see expect

last We're everyone years, hope I've As I've that's continue in talked to in. going continue proved physical to by to We of going to been we've the are of investors are set some to couple I now a invest over sort there do that to we We're going aside. to be. things to pretty open for shareholders distribution, that that. are going payoff and invest

Okay?

salaries, pretty the to sobering, and but marketplace. numbers going we also invest are you I on people, saw those they we're competing mean, in But in were

I think successful being we're there.

where was XXXX, we've 'XX. year, Last And bottom. reached it a place down our I year. rates. It in from touching In was XX% was XX%, at it turnover looking in this I was our turnover was XX%. think we're XXXX,

in of me tells of We've kind retirement areas those and the care what things. right paying a on and done top-quality sure on comparative we health and making have benefits, to lot really that that So be hitting we need are people. benefits that balance we

that in needed talent going marketing And key did done, hired really We hadn't year. last one we the we're to. great of hadn't really on that. that to area some we're So that one there. was that focused done, said we've areas We we that invest we

additional we're to. to also going but need and So that we we've some we've be in costs, investing got those media got

think And sort look, done think I been we've the of our we'll it with tied hand I on kind the And business. behind and winning back. account we've of -- growth growing marketing without

I going help out It's get back. us. behind to from that think our really we

going about And be So our that. and call fourth IT that we about number that's did I'm investing is then, to really we're And the cyber. one said at in generational as the optimistic for this that we this a this planning looked because we year, Jerry big talking and investment in IT.

I'd I'd And revolved lot you're areas. around say, down experiences businesses. into customer it's which really, growth if is the and interested, One around break for three a mobile, it and consumer really commercial digital,

from number almost going are area. We of X We're We a of processing our X core new XX, our We're We issue, We're take systems. payments, agile are on competitive of at There modernization loan need them. care X need a them and system. the certain is life. providers. which to digital commercial of need end invest up to which check in bank we speeding big doubling real-time system, a in to correspondent of developing is teams.

they're checks and process a are So of gone, check yes, away, going but them. lot we not

core probably terms that's of modernization. in XX% that So

we're and over XX%. all And expenses probably percentage growth And We remember, really an believe up security increase. necessary winning increase at and a great the from we've we XX% for looking IT-related on, empathetic XXXX, from in bank need at and technology it can't service investment increased that IT. backed IT, and other a was 'XX. customer our And call to expand 'XX 'XX, it's competing down a the expenses. technology, I in our and I'll is success mitigation, continue piece. XX% we generational on 'XX in say but we're X% fraud And that year, for necessary organic big that's it, in experience then that's the sleep to We've efforts information been I competition because that's and

investments to same we to next believe that have are as I all Now XXXX. going make having said the those year that, at we're in look don't level into

that. do money. think number. down big We are, to think compete as this doing and beyond. to hit we'll and so it's we're we go need rate hate that we don't So a and spending we We worse see wasting do even hate I XXXX run and We where

Got for that color. Really all it. Thanks appreciate it.

Please next go question is ahead. The Dave Rochester Point. you. from coming Compass Thank of

was a those the the Thanks. And see guide. in baking quick for assumption, year. the I one what is what rate Just that for in in? the impact NIM the and July, curious NII for on rate is you're hike February deposit moves if you that? cut not sensitivity muted maybe more you're baking on sounded the just an but assuming a total positive, was like it give trend the update could growth beta I into wondering then you you're deposit

up We total. we had the mean, would to kind on up. kind I I with where expected XX% interest-bearing a think be. year And we'd really XX%, be that start about just said ended XX% we ended of deposit we about on at I'll guess I betas. where Right. of that's XX% we

fourth quarter. think were the in I -- we higher So for

said we But we more in we ended to bit little cumulatively have third we expected. up I were. that a thought be than I think quarter exactly I where the aggressive

far As that what the we're have think next kind in back. we year same as or year, this February in first And would go I betas is of for me. we of sort where is had that we excuse the assuming quarter for basically increase

to back betas, bit probably XX%, take at somewhere more I think XX% are assuming to we and aggressive were be say, we'd XX% July. we where the that then in a little we're assuming interest-bearing, on about we're think that I assumptions our closer right all now that

our to had you today. think kind one the we think assumptions I on. current we'll we other want along market but see, have is, I those to of And are all is, where question said see just And

The move right NIM? think moves much in sensitivity the that then guys are to that how February, the July, of in the the you hike and looking we cut will at,

going do will I peak And We really have it's But lot it sort that to have dependent on all be think the will we're From that think about I level said, A a happens be on third of want think decrease. I we Yes. I where I don't what careful. what right good a in on to those said itself. the give percentage percentage feeling the Like detailed guidance. don't NIM at. is, significant impact before we're quarter our standpoint, deposits. just projected of

a little do yes, I bit muted in it said, I've was XXXX? like it's feel As than XXXX more in

mean, think that we repo. I just moving certainly. it in I although into most the linked of a movement, saw Yes, was lot quarter of some

we had out is account so issues also product because choosing the fact certain that more customers the collateralized. liked to in and the and And account sort some operational into repo. flow move the processes they of market of money that, coming repo And money of that

So we see some movement there. did

So tend but to of have risk to although side, I year to be opinion. commercial going relatively going softer the in most on we it's the soft, still my this is concerns, the saw less on than it's DDA be interest-bearing

million on little gives As point a pretax a basis us what us, quarter. a basis, as over far XX we hike it about $X think a gives

last quick one. maybe one Okay. Great. just And

figure On the office ratio an you the gave updated coverage book, today's rates. right? Is that's on service XXX-debt that for

where we Yes, today. average that's stand on

guys. Great. Thanks Okay.

little remember if tax. said I around I Dave. on that's make over basis. an couldn't after-tax a said want I just after pretax sure when to X%, Hey I

Okay. that. for Thanks

The Gailey KBW. is from ahead. coming Brady go of Please question next Thank you.

about wanted bond growing to I with comment the portfolio. start your

I think XXXX. billion net about in on $X.X basis of a

are of was at do cash the If quarter, assets. especially fourth billion potentially Is average adding bonds It least book, 'XX? the on that bond you to the earning could possible as XX% has Frost basis you upside of consider like adding $X it of at attractive there more look the feels amount than in today. the you'll average an the still in rates amount some more that to

guess get we if correction, we what just Should Right possibility, an we the we we're now, concerned I'd opportunity could opportunity, of on on what's deposits. something sure that we a it's get something I that's with going that Yes, the exactly jump yield is, we're about. side it's making really with understand in. market what think sort say some talking is obviously. with

Like is but But really never of we're the the -- we're sort with we're numbers modeling. is there right our I now, way said, possibility. I never think So kind projections. say of really go thing, I giving that that I'd

I not grows. a Let's we $X billion, only a And in billion, $X.X million only little over that over we in year, had little we $X.X think, had forget spent XXXX, inflows. bit that in

$X.X So net we spent million.

bit. So the needle we've a quite moved

some made this $X January in roughly. we've so, already of I billion, think, of purchases year And

market. don't see given the a could that point. in as yes, So at I we, always happens what that's a possibility yes, high probability this But

Okay. on running up you guys, keep an And and that's question unit second not model, that for new model. is my I gets think then, Is mortgage. originated relatively originated sell an

have continues just growth that digits beyond mortgages. do that those So think the because growth keep as lever to new outlook you'll will single loan you business the as high that, you that mature, of push loan

out, portfolio. the back Good the But of if I to know the look be above we're that it. I the don't it's be XX-ish used don't way additive the them enough it mind move if out needle. to have before, going I it will really portfolio. turns single when of portfolio of question, the percent but goes that hope digits, high it'd significant to think have would book part The area, it XX% around on we is, to you much it a be in I X know how XX%, years Brady. my

we'd I just directionally, be level. think that same in So

and add you pencil kind would that would much how could of out took volumes of kind be, that if what you sort that might to be of So what growth.

Okay. Great. Thanks guys.

Thank The question next Manan you. ahead. Stanley. go Gosalia from is Please of coming Morgan

as go moves quick And set system, or I you on Are rate think loan a off, you and rolls lower. lower expense had that processing et new then, environment expense some for follow-up you expenses Or rate down have you I XXXX come check as comments have system pretty growth into one goes? in way get Do base 'XX? of do basically also moving in stone that a that run the on had which XXXX? you depending running you on old think the on stabilize the go these XXXX, do clarification side. much your overall the into the actual or the the can off Thanks. new the cetera, you and as dollars flexibility

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is from of Winter ahead. Peter D.A. Davidson. The coming next Please question Instructions]. [Operator go

low credit sitting risk. you I thought are I your always your guys but buybacks. buybacks here? is share are So, what curious know very on on was on just it's capital what strong thoughts ratios, not focus, share a

you. Yes. It's that's with not to honest mind of quite really be something top

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A-type what Phil, C and just Dallas? on comments, the like of if was most your I properties. you're you And comment your could wondering Okay. to B seeing properties the exposures But then space. I and just Houston office heard on

issues to sponsorship, things, guarantees, all come and the those space, wise can There equity, of all be aren't than try much go as C know radar is just hard have that and there I aren't get country you're have to that, that into get of if just because just that's that are right? B into recognition my seeing to to tell I you office on the don't properties to that many over imagine really nice more it. anything some I there. portfolio to I that better employees what people going But and complex depend can out people that's going using you're kinds it

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you. is The of Please go from question next Thank Capital RBC Markets. Arfstrom ahead. coming Jon

just maybe nice that's between a comment to got you've off them. difference environment earlier, agree, pipeline But the to and made of and own versus a more that understand of pipeline two? Peter you were talk competitive questions Can prospect back. us of That's Phil, I good the little that scratched bit comment. you about a the about more Most one but help just my more? be bit took a your Thanks. a and question, people little get

Yes.

consistent do We underwriting. right, the lots what are of got calls we People we've deals, getting know for because got we've in marketplace. liquidity,

all It's was, is way to of do up. deals. that point goes, underwriting not also my should as We tightening say and guarantees as those stuff. and far we're and that I as equity bank things, We bank people, coming right? looking far kind As that our relationships. not all But

the some rings always relationships we've that. have on been to for phone the there opportunity wanting but And So to be might more. okay? we're that see do, lookout that And we'll now the

point that. me, same-store like I it's But having not do you are are kind deals They're advantage the I mean you balance deals have not have in in But on sheet see the the right? them they're more sales. you the do, we activity, there us do. looking marketplace looking the of already papered know reputation me, of that they're that to prospect been my the to So we it's and to already customers the and it's our we do, customers, are prospect. deals might the that out are new have see that deals for already necessarily pipeline that with to

new that, prospect But of still the deals we just in that have. or them. them, it's but at on advantages not deals slower what okay, that's we're their we've on got it the like, are point me, they're If my business. is, marketplace So that new seeing seeing not me. awful customers, good as I'm there because from out to they're are I Maybe meant we it, it deals doing to because looked was our

of thing That's seeing then in kind your kind talking a permanent other expenses slowing security expenses. as it's IT helpful. step-up 'XX? or expenses coming in or flattening that Are Thanks. you 'XX one Good. a for and just down Okay. modernization just of and out we core step-up just and on growth 'XX. -- spending Are rate in and a related And that's about the

IT do a the rate of the growth year care mean is has I the before inflation to Yes, last expense Again, the some having out growth things, all staying won't it been I with a where coming same be it And of XX%. growth cost Jon, and out it's cost. on we be we -- health of X those out-of-control our make for this there. used And because into rate once rate. years, It's last in X be down. years load. it's kind X but thing. our X is base this that mean growth there'll to

IT back get days. clearly these it's levels. But those think I it to we'll to need more down historical

Thanks Okay. All guys. right.

the in showing would back no closing Thank this turn to Green to additional you. questions for queue I Mr. comments. floor like We're over at time.

for All And your We'll adjourned. right. today. thank interest. participating your Well, we want everyone to for thank and for questions you be

for concludes you Cullen/Frost teleconference. This interest thank and your in Ladies today's and Bankers. gentlemen, participation

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